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Australian Dollar Gains as RBA Rate Cut Bets Deteriorate

Australian Dollar Gains as RBA Rate Cut Bets Deteriorate

Talking Points:

  • Australian Dollar rallies versus USD ahead of RBA rate decision
  • Australian Current Account and Chinese PMI crossed the wires
  • RBA rate cut bets appeared to deteriorate in data’s aftermath

Find key turning points for the Australian Dollar with DailyFX SSI

The Australian Dollar began rallying against its US counterpart after the Australian Bureau of Statistics released the nation’s Current Account figures. The country’s deficit narrowed to –A$18.1 billion in the third quarter from –A$20.5 billion in the second. More importantly, net exports were shown to have added 1.5 percent to overall GDP, topping forecasts calling for a 1.2 percent reading. This is the largest contribution from the external sector in about six years. Investors cheered the outcome, which seemed to dull worries about negative knock-on effects from slowdown in China.

As for China itself, the country’s Non-manufacturing PMI for November was leaked shortly thereafter and fueled further Aussie gains. The reading came in at 53.6, beating September’s 53.1 result and pointing to faster service-sector activity growth. The Manufacturing PMI figure crossed the wires minutes later and missed the 49.8 estimate, coming in at 49.6. The AUD/USD briefly paused its rally and corrected lower, but the move would prove to be short-lived.

Overall, the data appeared to decrease RBA rate cut bets in the near-term. The markets are not expecting the central bank to reduce its interest rate at the December policy meeting. In addition, the priced-in probability of a 25bps RBA rate cut in the next 12 months is now hovering near a four-month low at 64 percent.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.